Watchdogs revved up over OFT report on fuel prices

WHAT rises like a rocket and falls like a feather?

The answer is the price motorists pay for petrol and diesel – quick to rise when the wholesale price goes up but slow to fall when the wholesale price comes down.

Surprisingly, the poetically worded analogy comes from a report by the Office of Fair Trading, which this week decided despite some grave concerns – the retail market for petrol was “working well”.

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However, the high cost of petrol in the UK is causing a great deal of concern, with motoring organisations warning the cost of private transport, particularly for people living in rural areas, is now so high it is damaging the economy and costing jobs.

In a report presented to the UK parliament, the RAC cited one example of a person who had given up work because of the high cost of commuting. Another person said they sometimes slept in their car to save money.

Mileage travelled on rural roads dropped by 4 per cent in 2012, while the total number of miles driven on UK roads last year dropped by 1 per cent.

And things are going to get worse. Before Christmas the Coalition government cancelled a scheduled 3p rise in petrol duty. However, wholesale petrol prices have just risen, meaning a 4p increase is very likely in the next two weeks.

According to figures from the OFT, consumers have seen petrol prices rise from 76p per litre ten years ago to 136ppl today while diesel has risen from 78ppl to 142ppl. Over the same period tax has increased by 24ppl and the cost of crude oil has risen 33p.

Evidence from the organisations suggests family budgets are at breaking-point, with every rise in petrol price followed by a drop in consumption.

Figures from the AA show UK drivers cut their consumption of petrol drastically after prices at the pumps went up in March and October last year. The average consumption of 1.500 million litres a month fell by 100 million in March and 30 million in October.

Luke Bosdet, head of public affairs for the AA, says: “HM Revenue Customs’ figures for petrol consumed by the UK last year show where family and business budgets break.”

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RAC technical director David Bizley said: “Rising fuel costs cripple households’ spending power and serve to stifle economic recovery, so it is vital the market operates in a manner that is fair to consumers and business.

“We’re extremely disappointed to hear the Office of Fair Trading will not be launching a full-scale review of petrol and diesel pricing in the UK. We have campaigned long and hard for greater price transparency and will continue to do so until this is recognised as a serious issue.”

Campaigners say there is not enough openness about wholesale prices, and that decreases in the price garages pay for their petrol and diesel are not being passed on to the customers.

Among the findings the OFT chose to ignore was the fact that motorway service stations were found to be charging 7.5 pence per litre more for petrol and 8.3 pence per litre more for diesel than petrol stations in cities and towns.

While the OFT did announce a further investigations into prices in the Western Islands, there was no offer of help to other rural areas, where motorists are paying on average 1.9p per litre more for petrol and 1.7p per litre more for diesel.

Deputy leader of the Scottish Liberal Democrats Alistair Carmichael, MP, said: “People in the Highlands and Islands will take little comfort from the OFT’s findings. The fact is, many motorists in the North of Scotland buy their petrol or diesel in an environment where competition simply does not exist.”

The OFT report failed to address suggestions that retailers and wholesalers are making money by capitalising on the fluctuations in price. Some campaigners believe the wholesale price for petrol should be displayed on garage forecourts or even printed on petrol receipts.

SNP transport spokesperson Angus MacNeil MP said there was a need for a fuel industry regulator to keep tabs on the market. But he said the real problem was fuel tax was too high: “The chief culprit for soaring fuel prices remains the UK government, who take almost 60 per cent of the cost of petrol and diesel – the highest fuel tax grab in Europe.”

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He said European figures published this week show the UK has some of the lowest wholesale prices in Europe but that motorists pay the highest price at the pump: “European Commission results published this week show just how badly we compare to other EU nations. As one of the world’s largest oil producers, Scotland should be enjoying the benefits of record oil prices, instead of feeling the pain at the pumps.”

Tory MP Robert Halfon has tabled an early day motion in Westminster calling for a full enquiry into what is really going on in the UK’s £34bn retail petrol market.

Meanwhile, campaigners FairFuel UK have blasted the OFT report as a “whitewash”.

Quentin Willson, FairFuelUK campaigner, said the suggestion the UK energy market was working well had “shocked the nation. “We have whistle-blower evidence that speculators and commodity houses are pushing up the price of oil and it is common knowledge that the UK road fuel market is anything but transparent. Consumers are confused and angry and want to know why oil and fuel prices keep rising when demand is falling.”